Consumers conducting a transaction using a financial card, such as credit card, will sometimes use the card at a merchant point-of-sale (POS) terminal in a country that has a local currency different than the primary currency (home currency) of the cardholder.
For example, a consumer may be issued a credit card by a US bank, and transactions posted against the card will be posted in US dollars (the home currency). The customer may want to use the same card at a merchant outside of the US, where that merchant will typically use a foreign, local currency in establishing the amount of the transaction. The local currency is later converted by the issuer when posting transactions to the card account and sending a statement to the cardholder for payment. As an example, the card issuer may prepare a card statement that shows, for any transaction conducted using currency other than the home currency, the amount of the transaction in the local currency of the merchant and the amount of the transaction converted to the home currency.
More recently, dynamic currency conversion (DCC) permits transactions to be processed in a home currency, even when the transaction is conducted at a merchant that uses a different currency. Systems implementing DCC determine the home currency and apply an exchange rate at the time of the transaction. The home currency can be determined at the POS terminal, for example, by accessing the bank identification number (BIN) included in the account number stored at a magnetic stripe on the card and, more recently, for chip-based smart cards, by accessing an application currency code (ACC) stored as a “tag” in the memory of the chip card.
DCC is thus a service that a merchant may offer (e.g., through its card payment processor) to customers as a convenience. The merchant usually establishes and controls the exchange rates that will be used to convert the transaction amount. A customer may approve the converted transaction amount (e.g., by signing a printed receipt or tapping an “approval” button at the POS terminal). A customer is thus made aware of and accepts, at the time the transaction is conducted at the merchant location, the exact home currency value of the transaction that will be processed and posted to the customer's account.
Difficulties sometimes arise in the conversion of a transaction amount to the home currency of the card. For example, while the POS terminal at which the transaction is conducted may store exchange rates that can be accessed based on the ACC, those exchange rates may not reflect the latest currency fluctuations, and may provide a converted home currency that is not entirely up-to-date. If the merchant desires to maintain up-to-date exchange rates, frequent downloading of exchange rates (daily or several times per day) may be needed, which may in turn slow down the processing of transactions at the POS terminal. As another example, the merchant operating the POS terminal may not want to conduct certain transactions in a currency other than its local currency, particularly if that other currency is one that is subject to frequent or volatile fluctuations and risk. Thus, the merchant may want greater control over whether or not to use DCC for any given transaction.
Further, in some cases, the existence of the ACC stored on a chip may not provide enough information to the merchant or to an issuer to determine whether they would be willing to use home currency in DCC. Thus there has arisen the need for more control by the merchant and the issuer in providing dynamic currency conversion, rather than merely relying on whether or not an ACC (reflecting home currency) is stored on the chip card.